While they've propped up many local government areas, they've failed to address the underlying economic and social challenges those in rural Australia face.

Under growing economic pressure, the Albanese government is now looking for savings in its first budget. Unsurprisingly, Regional Development Minister Catherine King is sending not-so-subtle hints about cutting regional funding.

In response, the Coalition's regional development spokeswoman, Bridget McKenzie, paints the human angle of mayors dependent on this funding for their communities. And there's some truth here. There's anecdotal evidence suggesting that there are local government areas financially reliant on the recovery money that flows from more regular natural disasters.

Some will tell us any decision to cut funding highlights Canberra's ignorance about those in the bush. Others will be keen to argue that this is evidence of the ideological battle lines between the bush and the city.

This funding debate highlights how neither party adequately appreciates the challenges and opportunities in regional Australia. Furthermore, it illustrates that our regional development policies focus on economic life support for, not the development of, regional Australia. Senator McKenzie's comment, "I'm yet to meet a local mayor to say 'my project doesn't need federal support", illustrates this point well. But such arguments hardly ensure a strategic approach to developing regional Australia.

Earlier this year, we reviewed the annual reports of local councils in northern Australia. This review highlighted that many LGAs in the north are struggling, and some are financially unsustainable. A 2021 audit of Queensland LGAs, found that 60 per cent of the sector is at moderate or high risk of being economically unsustainable.

The fragility of local councils is a national problem.

LGAs in Australia report their financial performance in terms of the extent to which revenues raised cover operational expenses only or are available for capital funding or other purposes. This is the operating surplus ratio, and LGAs seek to have a ratio of between 0 and 10 per cent.

A review of non-capital-city LGAs where Defence is based shows that operating surplus ratios for the 2021 financial year vary between 11.9 per cent for Mid-Western Regional Council in the central west of NSW and 12.6 per cent for Wyndham City Council west of Melbourne. Other results worth mentioning are Wagga Wagga City Council, 7.3 per cent; Toowoomba Regional Council, 1.4 per cent; Cairns Regional Council, 1.4 per cent; the City of Rockingham, 0.8 per cent; and Liverpool City Council, 5 per cent.

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Without federal assistance, LGAs have few options: rate rises, cuts to services and amalgamations. All these options are emotive for those living in regional Australia. Australians should welcome the Albanese government's decision to increase Australia's emission reduction targets. But as a nation, we must recognise that doing so will not come without costs. Unfortunately, Australians will not share these costs equally. Instead, our already so often economically and socially struggling regional communities will likely bear an inequitable burden when they can ill afford to.

The Albanese government must take a sharp pencil to the federal budget. Unlike previous governments, new debt won't be able to be secured at low-interest record rates. But, this ought not to be an argument for wholesale cuts to regional development.

All Australians must accept that hard choices are needed. Before making these choices, the government must move away from propping up at-risk LGA and spreading funding like economic fairy dust. Instead, it must focus on developing a strategic approach to regional development.

Regardless, wholesale defunding of regional Australian development programs is not without economic, social and national security risks.